Support for Limiting Private Equity Dentistry- made to New Mexico Board of Dental Health Care

Report submitted in response to request of Dr. Robert Gherardi, New Mexico Board of Dental Health Care- June 13, 2012

It is important to get up to speed, with specific nomenclature of Interstate Corporate Dentistry, and specific factors of related Case Law.

A Dental Management Service Organization (DMSO) controls the operations of their subordinate dental clinics. They pay staff salaries, including doctors’ salaries. They control the supplies available to each dental clinic. They (not the individual dentist) select the laboratory to be employed for lab services (dentures, crowns, bridges, etc.). They set production quotas and bonuses for individual doctors & individual clinics. They monitor and evaluate each clinical service provided, by each Provider they employ. They control the bank accounts of each individual dental clinic, and sweep those bank accounts on a very regular basis. They pay rent on real estate, of the clinic facilities. They select & maintain dental equipment for each subordinate clinic. They are responsible for the Licensure & Accreditation of each employee. They generally supply the Malpractice Insurance for their Employee Dentists, but often will not purchase “Tail Coverage”.

On paper, the DMSO owns very few hard assets, but actually pulls the strings, of the Practice of Dentistry. Their most valuable assets are their contractual obligations, which have been demonstrated by the Fifth Circuit in re: OCA, Inc. December 12 2008 (07-30430), to represent the “Unlicensed and Unlawful Practice of Dentistry”. Increasingly, we are today seeing more DMSOs, which are offshore registered corporations, versus Delaware incorporation.

“Owner”- The individual dental clinic Owners are generally shell companies, which the DMSO utilizes as an accounting device for pass through of moneys. Moneys sourced through Medicaid, private insurance, and individual patient payments (private pay, insurance co-payments, etc) are deposited into the bank accounts of local dental clinic “Owners”. However, these bank accounts are in reality controlled by the DMSO, and not the technical “Owner”. Shell company “Owners” is generally, duly Licensed Dentists of that particular state. However, they may not actually engage in clinical practice, within that state. The DMSO employs a bogus front “Owner”, to masquerade as an “Owner” for state regulatory requirements, usually for a modest monthly stipend. Other times, the bogus “Owner” is structured as a franchise operation. No “Owner” may freely sell “their” dental clinic, nor pass the asset of “their” dental clinic onto potential heirs. Thus, the legal definition of “Ownership” is not met. The fake dental clinic “Owner”, and not the DMSO, is generally registered with each state’s licensing agency. The fake “Owner” is foremost positioned for potential civil, criminal, and/ or regulatory violations, and not the controlling DMSO (true power of ownership). The DMSO can easily replace dental clinic “Owners”.

Doctor/ Patient Relationship has been demonstrated to be a special legal contract or tort. It is a unique contractual relationship, in that one Party (Doctor) has access to expert knowledge and information not readily available to the Second Party (Patient). Because the Doctor’s expert standing places him or her at such an extreme potential advantage, the Doctor’s first obligation MUST be to the Patient’s best interest and welfare. By contrast, a private equity firm’s first obligation is towards their shareholders & corporate profits. The conflict of interest is obvious.

A DMSO involved in the Practice of Dentistry is engaging in a conflict of interest. The extent to which a DMSO pressures doctors with production quotas, production bonuses, elimination of their selection of laboratories, control of essential patient materials & supplies, etc. represents the “Unlicensed and Unlawful Practice of Dentistry”, per the Ruling of the Fifth Circuit (07-30430). The Patient is at a complete disadvantage in such a tort arrangement (Doctor/Patient Relationship). They are also usually completely ignorant of the influence of the Third Party (DMSO), within the Doctor/ Patient Relationship. Thus, the Doctor/ Patient Relationship is made to be an Unlawful Contract, in these situations.

Informed Consent Process is not simply a Patient or Parent’s signature on a piece of paper, as some sort of waiver. As established by the American Medical Association (AMA), American Academy of Pediatric Dentistry (AAPD), ADA Principles & Code, etc. Patients must give Informed Consent, with full disclosures by Doctors, of risks and benefits of every reasonable treatment option, including no treatment. DMSOs, which pressure doctors towards offering higher paying services, or production quotas for patients or production bonuses, are not generally disclosed to patients. A full and complete Informed Consent Process has been repeatedly established in court rulings, as a patient’s legal right. The extent, to which the Informed Consent Process is distorted, misrepresented or denied patients, and/or parents of minor patients, may be unlawful. The extent, to which Third Parties such as Medicaid or private insurance carriers pay for misrepresented unlawful services, may generate further acts of fraud. (One may wish to reference the federal or state Unfair Trade Practice Act.)